Hi
I just wanted to ask if dynare is able to estimate (and also make a historical decomposition of shocks) a model which has a third-order approximation ? This third order is needed to generate time variant term premia of financial assets.
Many Thanks
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estimation of third order approximation
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estimation of third order approximation
by alexmaci » Wed Oct 29, 2014 6:54 am
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Re: estimation of third order approximation
by jpfeifer » Wed Oct 29, 2014 9:43 am
No, that is not possible with Dynare. The particle filter currently is still experimental and does not yet support third order. Note that shock decompositions (in the sense of contributions of shocks to particular variables) at higher order are non-trivial due to non-linearity. There is no agreed upon standard way of doing this. If you only want to extract shocks, a particle smoother could work.
You could aslo try to estimate your model using GMM or SMM. An SMM example is contained in our replication files for Born/Pfeifer (2014): "Risk Matters: A comment" on my homepage.
You could aslo try to estimate your model using GMM or SMM. An SMM example is contained in our replication files for Born/Pfeifer (2014): "Risk Matters: A comment" on my homepage.
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